Asian stock market optimism grows amid lower interest rate expectations

On Thursday, most Asian stocks experienced gains as optimism increased over the potential for lower interest rates worldwide. This sentiment was further bolstered by regional technology shares, which surged following overnight gains in Nvidia, a prominent player in the artificial intelligence sector.

Wall Street provided positive signals to regional markets, with the S&P 500 and NASDAQ Composite closing at record highs. These gains were partially attributed to weak labour market data, which heightened hopes that the Federal Reserve might cut interest rates by September. Adding to this optimism, the Bank of Canada reduced its rates on Wednesday, and a widely anticipated cut by the European Central Bank on Thursday contributed to the favourable outlook on lower lending rates globally.

In Asian trade, U.S. stock index futures showed slight increases, with a focus on additional labour market data.

The best-performing indexes in Asian trade on Thursday were those heavy in technology stocks. Hong Kong’s Hang Seng index increased by 1%, while Japan’s Nikkei 225 index rose by 1.3%.

Stocks related to chipmaking saw a notable rise after Nvidia Corporation surged to a $3 trillion valuation on Wednesday, driven by continued excitement over artificial intelligence. Sentiment towards chipmakers was further supported by positive remarks from ASML Holding NV, the world’s leading semiconductor equipment manufacturer. Markets are betting that the growing demand for AI will boost global semiconductor demand.

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker and a major Nvidia supplier, surged 5% to a record high in Taiwan trading. Similarly, Japanese semiconductor testing equipment maker Advantest Corp., another Nvidia supplier, increased by 5.2%. In Hong Kong, Semiconductor Manufacturing International Corp., China’s largest chipmaker, saw a 3.7% rise in its stock price.

Broader Asian markets also advanced, with Australia’s ASX 200 rising by 0.8% despite trade data showing weakened key exports in April and a decline in imports due to weak demand. Japan’s TOPIX index also added 0.8%.

However, Chinese stocks lagged as a rebound rally from February to May began to lose momentum. The Shanghai Shenzhen CSI 300 rose slightly by 0.2%, while the Shanghai Composite fell by 0.1%.

In India, futures for the Nifty 50 index indicated a mildly negative opening on Thursday, following a week of significant volatility. Both the Nifty 50 and BSE Sensex 30 indexes rose more than 3% on Wednesday, rebounding from a steep sell-off after the 2024 general election results. The election revealed that the BJP-led alliance won by a much smaller margin than expected, with the opposing INDI alliance gaining traction.

Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.

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